The war in Ukraine will create an economic “price” for Ireland, Taoiseach Micheál Martin has said.
Asked if he could assure people that there would be not be a recession, Mr Martin said: “I can never promise anybody about economic cycles. The jury is very much out on that, but there will be a price for this war.”
He stressed that current economic forecasts were still projecting “an element of growth” in the second half of the year.
Mr Martin was speaking on the second day of his trip to the United States for St Patrick’s Day. Tuesday’s agenda was dominated by economic issues and the Taoiseach met several business groups, including the US Chamber of Commerce, before the annual Ireland Funds dinner on Tuesday night, which was also due to be attended by US president Joe Biden.
We were doing very well. Projections are still that Ireland will grow
Mr Martin also attended an event with the Collison brothers, the multibillionaire founders of internet payments company Stripe, who received awards from Science Foundation Ireland.
Mr Martin said Ireland was an open exporting economy and if our large markets in the US and EU came “under pressure”, Irish companies would not sell as much to European and American consumers and industry.
He said European Central Bank president Christine Lagarde had given EU leaders a presentation on the impact of the war last week and there was a debate among the leaders as to whether there should be a further EU-wide stimulus like the package introduced to tackle the pandemic in 2020.
“That’s a debate that will continue, so no one can be certain about what will happen over the course of 2022 in respect of the economic situation. We were doing very well. Projections are still that Ireland will grow and that we will not be in recession, that’s the projections. But this could unfold in a number of different ways and we can’t be certain about that at all,” he said.
Minister for Finance Paschal Donohoe said those involved in public sector wage negotiations should reflect on the challenges facing the Government in view of the war in Ukraine and the ongoing costs of the pandemic. And he warned of the danger of a price/wage spiral, with higher prices pushing up wages, which lead in turn to further price rises.
“That is a risk, it’s undoubtedly a risk at the moment, with the development of wages within our economy and the changes in wages that happened particularly across last year,” he said on a visit to London, where he is representing the Government for St Patrick’s Day events.
“I have yet to see a wage movement that could trigger a risk like that happening but it is a risk. And we just need to be careful as we make decisions in relation to wage levels in our economy, that they are sustainable, that they’re affordable, that they don’t create additional risks in the future. I don’t see that happening at the moment but it is a risk that will need monitoring.”
Mr Donohoe has ruled out any increase in the help offered to consumers to pay higher energy bills before October’s budget. He said the measures were designed to anticipate the current surge in energy prices and he was not planning to improve them.
“My focus has now got to be on implementing what we have agreed and making sure the energy rebate happens soon,” he said.
“And what the Government has done overall, I believe, is trying to help people with the higher cost. I just want to emphasise again, we cannot cover all of the additional costs that citizens and businesses are now facing but we’re trying to help . . . We will review all these things in the context of the budget”.
Mr Donohoe said the Government was looking at how to tap into contingency funds to deal with the cost of accepting Ukrainian refugees into Ireland.
He said “it will be a lot later in the year until we’re really clear on what are the economic consequences of hosting those who will be coming to our country . . . but we will meet those commitments”.